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You are here: Home » Resources » Articles » Does Your Environmental Due Diligence Pass the EPA Test?

July 23, 2015

Does Your Environmental Due Diligence Pass the EPA Test?

By Bill Tryon

SOMETIMES, A PHASE I ESA ALONE JUST ISN’T GOOD ENOUGH.

The Phase I Environmental Site Assessment (ESA) is a critical tool to understanding and managing environmental risk associated with a real estate asset. But when do you need more than a Phase I ESA? For buyers who want to qualify for defenses to liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the answer is always. In order to qualify for such liability defenses, EPA requires property buyers to go beyond hiring a consultant to complete a Phase I ESA.

CERCLA and AAI

Under federal laws, the owner of a property can be responsible to clean up a property even if they didn’t cause contamination and did not own the property when the contamination occurred. It is possible to qualify for defenses to CERCLA liabilities, but only by carefully following the requirements established by EPA. A Phase I Environmental Site Assessment can be an important tool to protect buyers from the negative impacts to cash flow, value and use of real estate, and ability to sell or finance the property that can result when contamination is present, but it is not enough to allow buyers to claim defenses to liability under CERCLA.

According to EPA’s Rule, buyers who may want to claim CERCLA defenses to liability must perform “All Appropriate Inquiry” (AAI) consisting of two things:

  • An inquiry (Phase I ESA) by an environmental professional and
  • Additional inquiries defined by the Rule

Continue reading the GlobeSt blog here.

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